Charging Ahead With a New Electric Car

An entrepreneur hits the road with a new approach for an all-electric car that overcomes its biggest shortcoming

It took him a year to consider the options for propelling a vehicle—biofuels, hybrids, hydrogen—before settling on electricity. In the fall of 2006, in a talk he gave at Tel Aviv’s Saban Center for Middle East Policy about running a nation without oil, he mentioned his interest in electric car technology. A week later, Agassi says, he got a call from future Israeli President Shimon Peres, who expressed interest in the concept. Peres introduced Agassi to Prime Minister Ehud Olmert, and, at Davos in 2007, brought him together with Carlos Ghosn, the CEO of Renault. The partnership was formed “very quickly,” says Patrick Pélata, Renault’s chief operating officer. “We were already working on electric cars, and we realized you need three things—a cheap way of charging a battery at home or the office, a quick charge method and a quick drop for people who want their cars for a longer range. Agassi was the only one proposing that.” Agassi quit SAP and, in 2007, founded Better Place in Palo Alto, California. He attracted $200 million from investors, including the Israel Corporation, which owns oil refineries, and investment bank Morgan Stanley. This past January, Agassi announced another $350 million from backers led by the British bank HSBC, raising his investment total to $700 million.

Israel is a natural launching point for electric vehicles because of its small size, seldom-crossed borders and sensitivity to fossil-fuel dependency. The company plans to open its first switching station in Israel near Tel Aviv this year; the goal is to expand to 70 by the end of 2011. Agassi has installed thousands of “charge spots” in garages and parking lots, where drivers can plug in their Renaults for the standard four- to eight-hour, 220-volt recharge. Renault says it hopes to sell 100,000 electric vehicles in Israel and Denmark over the next five years—each equipped with a modified GPS system that will direct drivers to the nearest battery-swapping station or charge point. The vehicle, which can travel about 100 miles on a charge, will reportedly cost $25,000 to $30,000; Better Place hasn’t disclosed the cost of a battery-servicing contract.

Agassi also hopes to work with an Israeli utility company to purchase electricity from solar generators, to reduce his company’s carbon footprint. “The company is looking at the whole process, from the technology inside the car, to the infrastructure, to the charge spots and the connectivity that make all the pieces work together,” says Thilo Koslowski, an automotive analyst with Gartner Incorporated, a Stamford, Connecticut-based consulting firm specializing in high-technology industries. “Agassi has the lead on everybody else.”

Agassi is focusing his rollout on what he calls “transportation islands,” largely self-contained areas that are receptive to electric cars. In Denmark, the largest utility, Dong Energy, is investing $130 million to help provide charge spots and switching stations for Better Place vehicles, and will provide the facilities with wind-generated electricity. Also, the Danish government is temporarily offering citizens a reported $40,000 tax break to buy an electric car—plus free parking in downtown Copenhagen.

In April, Better Place began working with Japan’s largest taxi company to set up a battery-switching station in Tokyo and test four battery-powered cabs. Better Place has plans to operate in Canberra, Australia, and to run a pilot program in Oahu, Hawaii, by 2012.

Agassi is also aiming for the continental United States. He says he has spoken with San Francisco Mayor Gavin Newsom about building switching stations in the Bay Area. (In December, Newsom and other Bay Area community leaders announced a deal with Nissan—projected cost of the Nissan Leaf is $25,000, after tax credits—to install home-charging units for consumers.) Agassi says he dreams of the day when the big three U.S. automakers sign on to his plan and Better Place infrastructure blankets the country. “With about $3 billion to $5 billion, we can put switching stations across the five major U.S. corridors—West Coast, Northeast, Southeast, Midwest and South,” he says, his voice jumping an octave with enthusiasm. “We can’t fail,” he insists.

But others say he can. The particular battery he has adopted in partnership with Renault may not be accepted by other car manufacturers. That would sharply limit the number of vehicles he could service, or it would force him to stockpile different batteries for different car models, substantially raising his costs. Moreover, lithium-ion battery technology is improving so quickly that Agassi’s switching stations, which cost nearly $1 million apiece, may quickly become as obsolete as eight-track tapes. “If we have a breakthrough, with 300 to 600 miles per charge, the whole thing could be derailed,” says analyst Koslowski.

Better Place also faces difficulties breaking into markets. Without considerable tax incentives, customer rebates and government subsidies for electric car and battery makers, weaning Americans off gasoline will be a challenge. “The U.S. imports more oil than any other country and [gas] prices are the lowest in the West,” Agassi says. Even in Europe, where gasoline costs up to three times as much as it does in the United States, progress has been slower than expected. In Denmark, Agassi promised to have 100,000 charging spots and several thousand cars on the road by 2010, but so far he’s got just 55 spots and no cars. Better Place spokesman Joe Paluska says the company scaled back “while it worked out better design and implementation processes ahead of full-scale commercial launch in 2011.”

Terry Tamminen, an adviser on energy policy to California Governor Arnold Schwarz­enegger and author of Lives Per Gallon: The True Cost of Our Oil Addiction, says Agassi’s faith in battery-powered vehicles is excessive. The technology’s drawbacks, Tamminen says, include the potential drain on the electrical grid and the vast new infrastructure needed—such as tens of thousands of charging spots for the Bay Area alone—and the mileage limitations of even the best batteries. Tamminen, who also served as the head of the California Environmental Protection Agency, believes hydrogen-powered cars will play a role (he drives one himself). They use hydrogen fuel derived mainly from natural gas or other fossil fuels to generate electricity and power the engine; but Tamminen points out that hydrogen fuel can also be derived from water, and dishwasher-size machines that extract hydrogen from water will be available to consumers in 2013. Under the Hydrogen Highway Network, California has installed 30 hydrogen-fueling stations. “Yesterday I drove 150 miles to Palm Springs from Los Angeles in my hydrogen-powered electric car. I refueled in seven minutes and was ready to return that afternoon,” he told me.

But hydrogen fuel faces obstacles, too. U.S. Energy Secretary Steven Chu last year tried to eliminate federal funding for research into hydrogen cars; he cited the high cost and questionable durability of fuel cells, the expense of building a refueling infrastructure and the reliance of most hydrogen-generating processes on fossil fuels. (Congress, however, restored some funding.)

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